Airtel Africa loses N148.4b in first week

Airtel Africa Plc lost N148.44 billion in its first week of listing at the Nigerian Stock Exchange (NSE).

Airtel Africa’s share price dropped by 10.9 per cent to close weekend at N323.50 per share, N39.50 below its IPO price of N363 per share. With a loss of N39.50 per share, Airtel Africa’s market capitalisation depreciated by N148.44 billion.

The NSE last Tuesday listed 3.758 billion ordinary shares of Airtel Africa on its main board at N363 per share, the offer price for the telco’s initial public offering (IPO). It had two weeks ago listed on the London Stock Exchange (LSE), its primary listing exchange, at 80 pence.

Airtel Africa started trading last Tuesday with a seeming strong enthusiasm, rallying N136.4 billion gain in the five-minute auction period of the trading session. Airtel Africa had risen by the maximum daily allowable percentage change of 10 per cent to close Tuesday at N399.30 per share.

But as trading widened on the telco’s shares, Airtel Africa came under intense sell pressure dropping from N399.30 to close at weekend at N323.50 The telco had a weak start on its first trading day at LSE, dropping by as much as 16 per cent.

Market analysts attributed the reversal to selloff witnessed by Airtel Africa. Analysts said the wide distribution of Airtel Africa through the IPO makes the stock more susceptible to market dynamics, compared with the situation in the immediate week of the listing by introduction of its closest rival, MTN Nigeria Communications Plc.

MTN Nigeria was listed in May 2019 with a market capitalisation of N1.83 trillion, making it the second largest quoted company after Dangote Cement Plc. The listing of MTN Nigeria by way of introduction had triggered a massive rally that market capitalisation of Nigerian equities to a gain of N2.726 trillion in May 2019, one of the two positive months for the Nigerian stock market so far this year. Under listing by introduction, no new shares are allotted and the liquidity and price discovery of the stock depend on the willingness of existing shareholders to sell their shares.

Market analysts had expected wider distribution of Airtel Africa’s shares due to the IPO to moderate the pricing trend compared with MTN Nigeria’s pricing upsurge. MTN Nigeria had sustained a day-on-day maximum allowable gain for many days, setting off a major debate about the propriety of the pricing mechanism. However, the NSE affirmed that the pricing mechanism was in line with established market forces.

The Nation had reported that Nigerian retail investors had used special purpose vehicles (SPVs) to aggregate funds and buy into the Airtel Africa’s IPO. Airtel Africa’s IPO had been restricted to qualified institutional investors and high net worth investors (HNIs) in Nigeria.

Under the rules in Nigeria, a high net worth investor is defined as an individual with net worth of at least N300 million excluding automobiles, homes and furniture. This implied that only individuals and institutions with a minimum assessable investment of N300 million could have participated directly in the IPO.

To bypass the restriction, many investment houses created SPVs which were designed to aggregate subscriptions from retail investors. While the arrangements differed slightly, the investment firms used almost similar template for the SPVs, suggesting a sort of industry consensus on the approach to bypass the high net worth restriction.

Under the arrangements, the SPV aggregated demand from retail investors and used its net worth to subscribe to the shares on behalf of the retail investors. Once successful and its account credited with the IPO shares, the investment firm then crossed the shares into the CSCS accounts of the retail investors at the commencement of trading on the NSE.

Nigerian market has substantial retail investors. Latest data from the NSE indicated that domestic retail investors accounted for 42 per cent of total domestic transactions at the Nigerian equities market. The five-month report ended May 31, 2019 showed retail investors led the market in two months.

Airtel Africa, a leading provider of telecoms and mobile money services, is the holding company of Airtel Networks Limited (Airtel Nigeria) and 13 other subsidiaries in Africa – Airtel Congo S.A., Airtel Gabon S.A., Celtel Niger S.A., Airtel Congo RDC S.A. (DRC). Airtel Tanzania Plc, Airtel Networks Zambia Plc, Airtel Networks Kenya Limited, Airtel Tchad S.A., Airtel Madagascar S.A, Airtel Malawi Limited, Airtel Rwanda Limited, Airtel Uganda Limited and Airtel (Seychelles) Limited. Airtel Networks Limited, second largest telecommunication company in Nigeria, accounts for more than one-thirds of the group’s turnover.

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